The MJSDL’s 5th Annual Colloquium: Trade Agreements and Sustainable Development in an Age of Rising Protectionism

Michelle Larg is an Associate Editor with the MJSDL. She holds majors in Chemical Engineering and Chemistry from the University of Western Australia, and is currently a first year BCL/LLB student at McGill.

On Friday February 9th, the McGill Journal of Sustainable Development Law (MJSDL) welcomed speakers and guests to its 5th annual colloquium, “Trade Agreements and Sustainable Development in an Age of Rising Protectionism.” The event marked an extension of this year’s theme for the Journal: the nexus between international trade law and sustainability.

Richard Janda, Associate Professor and Faculty Advisor for the Journal, provided introductory comments to contextualise the day’s discussions. He began with a criticism of the “striking” disparity between the massive institutional resources devoted to the commercial sector and the relatively meager resources allotted to social and environmental concerns. While he acknowledged a general decline in the commitment to the trade agenda, he highlighted the potential for trade law to strengthen relationships between nations and advance global initiatives relating to social and environmental challenges.

The morning panel, “The Implications of Investor-State Arbitration on Sustainable Development,” was composed of Fasken Martineau’s Alexandra Logvin and Alexandre Toso, Hadrian Mertins-Kirkwood of the Canadian Centre for Policy Alternatives, and Karine Péloffy of the Centre québécois du droit de l’environnement. The dialogue centered around investor-state dispute settlement (ISDS), with the majority of the panel underscoring the potential for this regime to be abused by investors and corporate actors. ISDS allows foreign investors to bring claims for damages for violations of trade agreements directly to states, and poses significant challenges to sustainable development, environmental protection, and resource management. Indeed, Mertins-Kirkwood remarked that resource and energy firms disproportionately exploit ISDS to bring suits in these particular domains. Furthermore, he outlined the way in which ISDS enables foreign investors to bypass domestic legal systems in their favour, and can effectively expose governments to the risk of paying potentially unlimited sums in damages. Péloffy echoed this sentiment by describing the dangerous way in which resource extraction companies—such as Lone Pine Resources—employ ISDS mechanisms to claim damages for the loss of expected profits, even where those companies lack the legal right to mine or drill. Such causes of action, if allowed, could have debilitating effects on national economies and the ability of governments to protect the natural environment.

In spite of these issues, Logvin, (from the perspective of a commercial litigator), endorsed ISDS. She contended that it is the role of the tribunals to ensure a balance between sustainable development goals and the rights of foreign investors. Mertins-Kirkwood and Péloffy, however, were less convinced about ISDS’s merits. With Canada being simultaneously the most sued developed country in the world under the ISDS regime, and only having won 4 of 28 concluded cases, it is easy to see why ignoring ISDS’s pitfalls could be exceptionally costly.

Following lunch provided by Kahnawake Mohawk caterer Kwe Kwe Gourmet, food policy analyst Rod MacRae of York University commenced his workshop: “Food System Localization in the Face of Trade Agreements.” He argued that Canada has more room under trade agreements such as CETA, NAFTA, GATT, and the WTO to support local farmers than the government readily concedes. Since signing onto trade regimes, Canada has become more integrated with the American economy, and there has been an increase in foreign ownership of Canadian food system assets. Similarly, since Canada’s endorsement of the WTO Agreement on Agriculture, he argued that many domestic agricultural support programs and development schemes have been eliminated. MacRae suggested that while trade deals were presented as solutions to trade challenges at the time of signing, they have failed to reduce trade deficits; the rate of Canadian imports has grown at a higher rate than that of exports since NAFTA came into effect. He affirmed that if the Canadian government were to strategically and carefully interpret the provisions of trade agreements, they would be able to leverage them to their advantage. His interactive presentation was eye-opening and shed light on the many ways in which the inherent complexities of trade agreements can pose a barrier to their optimal implementation.

The final keynote lecture was presented by Wayne Garnons-Williams, a Plains Cree Indian and the Founding President of the International Inter-Tribal Trade & Investment Organization (IITIO). His remarks were entitled “International Indigenous Trade: Past, Present, Future”. Garnons-Williams underscored the fundamentality of nation-to-nation trade practices to Canada’s Indigenous cultures. He noted the lack of Indigenous consultation prior to and during negotiations for trade agreements like CUSFTA and NAFTA, despite the importance of Indigenous trade. To compensate for this gap, the IITIO has led efforts to develop an Indigenous Chapter for NAFTA, since the opening of NAFTA renegotiations in July 2017. It is hoped that the Chapter will enable Indigenous peoples to benefit from this trade agreement and be recognized as valued partners in the Canadian and international trade scheme.

The MJSDL Colloquium was incredibly successful in highlighting the intersections between trade law and sustainable development in a variety of fields: from international arbitration and agriculture, to Canada’s Indigenous trade practices. However, there is still much work to be done to implement sustainable development principles in international trade law, as Professor Marie-Claire Cordonier Segger noted in her closing remarks. We thank all of the speakers for their contribution to the trade law dialogue, and we encourage you to keep an eye out for the publication of MJSDL Volume 14 for more on this important topic.

Ontario: The Next Battleground for Carbon Taxation?

Laurent Crépeau is a second-year law student at McGill University and a Senior Editor for the McGill Journal of Sustainable Development Law. He is interested in the role of various public and private law instruments in implementing sustainable development. Before attending law school, Laurent completed a Diploma of Collegial Studies in Liberal Arts.

Recently, Progressive Conservative leadership candidate Caroline Mulroney expressed her reticence to enacting a new provincial carbon tax. She said she would consider taking the federal government to court over whether it is competent to enforce a Canada-wide climate plan that includes carbon-pricing. She was echoed by her fellow contenders, Doug Ford and Christine Elliot, who both reiterated their opposition to carbon pricing, asserting the policy was economically unviable. These positions constitute a break from the Progressive Conservative platform, which included the policy. This addition came under former leader Patrick Brown, however, who relied on estimated revenue from carbon pricing to finance new spending initiatives – it was claimed that these revenues would amount to $4 billion. The carbon tax would replace the provincial cap-and-trade system put in place by the  current liberal government.

With the federal government working on a national carbon policy, it is appropriate to look at the main options in consideration. In addition to a carbon tax, a cap-and-trade regime is being considered at the federal level. This piece gives a brief outline of the two frameworks, showcasing their pros and cons, and evaluates the traction of any eventual legal claims by Mulroney. It concludes by proposing that, Ontario being one of Canada’s major economic centres as well as Canada’s most populous province, should be seen as the most important battleground for carbon taxation and cap-and-trade advocates. The viability of any national carbon plan depends on convincing the province’s economic actors that their businesses will not be endangered by it and convincing its population of the policy’s desirability.

Cap-and-trade and Carbon Taxation – What’s the Difference?

Cap-and-trade is a framework that puts a progressively-decreasing yearly ceiling on carbon emissions for a given industry. Pollution quotas are then distributed to high-polluting corporations via auction. Hence, the market ends up determining the price of carbon, which creates incentives for corporations to invest in sustainable solutions and clean energy.

Carbon taxation simply imposes a tax on the volume of carbon produced by a given corporation. This regime allows for less customization than cap-and-trade, but it arguably gives more flexibility to corporations, which can decide to simply externalize the additional costs related to paying the tax.

When announcing her campaign for the Progressive Conservative leadership, Caroline Mulroney originally pledged to repeal the Ontario Liberals’ cap-and-trade program and defend the Progressive Conservatives’ carbon tax plan. She defended her shift in position by claiming that she was sticking to the party line at the time and is now advancing her own positions. At the time of writing this piece, we do not know whether this affects her stance on cap-and-trade as well. The point commonly raised by Conservatives to oppose carbon taxation is that it would target specific industries and stifle their economic development in Canada, a position Caroline Mulroney seems to agree with. If that is indeed her position, one might wonder whether she might be partial to cap-and-trade, which has the benefit of being readily calculable and forcing innovation, which effectively limits the waste of resources. Cap-and-trade has existed in the European Union since 2005, with the effect of drastically reducing carbon emissions. Though the system does not lack criticism, it is, in fact, achieving its objectives.

The Constitutional Equation

In the event that provinces decide not to implement a carbon plan, could the federal government come in and impose its own system? In all probability, yes. According to a 64-page legal analysis prepared by Manitoba law professor Bryan Schwartz at Premier Brian Pallister’s request, the federal government could legislate under its taxation powers as well as other heads of powers under s. 91 of the Constitution Act, 1867. If Professor Schwartz’s analysis is correct, this would bode ill for Mulroney’s promise to contest the federal climate plan’s constitutionality. The proposed federal framework, in fact, as noted in the analysis, is flexible and opens the door to “cooperative federalism”, leaving space for provinces to enact their own carbon regulations in addition to the federal structure. Moreover, this framework contains a “backstop” feature, which means the federal legislation would not apply to provinces having already enacted provincial carbon plans satisfying the federal benchmark.

All of this should incentivize provincial parties to put in place their own carbon plans in order to retain control over what could well function as a field of provincial legislation. Even if the federal policy retains its backstop feature, the federal government could end up suffering from continuous efforts to implement its own climate policy on top of the provinces’. This could have political consequences for the federal Liberals, since they will need every constituency they can get in the notoriously swing-happy Ontario during the 2019 federal election.

Ontario as the Major Battleground for Climate Action

Ontario is Canada’s most populous province and home to its greatest economic centre. If Canada is to achieve any significant progress with regards to carbon emissions, it is necessary for Ontario to chime in. If a provincial climate plan can be implemented, it will pave the way for a more serious transition towards a green economy and will serve as an example to other provinces. Knowledge accrued from implementing the climate plan in practice could later be used to further climate action not only in Canada, but in large economic centres around the world. Hopefully, Mulroney or whoever is elected leader of the Progressive Conservatives will prepare a climate plan and, in the event that they form the future provincial government, work with federal lawmakers to comply with Canada’s obligations under the United Nations Framework Convention on Climate Change.

Towards a Fairer Partnership: The Indigenous Chapter of NAFTA

Lian Francis is a first-year student at the McGill Faculty of Law and an Associate Editor with the McGill Journal of Sustainable Development Law. She also holds a Bachelor of Science in Psychology from McGill.

At the mouth of the St. Clair River, which marks the border between eastern Michigan and southern Ontario, lie the sprawling unceded lands of the Walpole Island First Nation. These lands are home to a confederacy of Ojibway, Odawa, and Potawatomi peoples. In August of last year, other Potawatomi peoples from Ontario, Indiana, Kansas, and Oklahoma gathered at Walpole Island for their annual meeting. One of the discussions centred around economy and trade, a particularly topical subject given that renegotiation of the North American Free Trade Agreement (NAFTA) also commenced that month. Walpole Island Chief Dan Miskokomon expressed hope that the negotiations would include recognition of his peoples’ “inherent and treaty rights.” The traditional territory of the Potawatomi, he said, extends on both sides of the St. Clair River; the delineation of the US-Canada border later divided it, but the border holds little meaning for communities like Walpole Island which have always straddled it.

Historically, Canada has a poor track record for consulting Indigenous peoples before ratifying international trade and investment agreements. Indigenous communities were not given a voice when NAFTA was first signed in 1994. More recently, the Hupacasath First Nation challenged the Canadian government in court over the lack of consultation preceding the ratification of a foreign investment promotion and protection agreement between Canada and China, an agreement the First Nation said engaged Aboriginal lands rights and interests. The Federal Court of Appeal ruled that Canada did not have a duty to consult with the Hupacasath before entering into the agreement given that effects upon the First Nation’s interests were “non-appreciable” and merely “speculative” (Hupacasath First Nation v Canada (Minister of Foreign Affairs and Attorney-General of Canada), 2015 FCA 4).

A UN report for the Human Rights Council on the rights of Indigenous peoples remarks that many international trade and investment agreements embody systemic imbalances between the enforcement of corporate investors’ rights and human rights. Such agreements, the report argues, have the potential to erode protections for Indigenous lands and to act as a significant barrier to land claims by prioritizing investors’ rights to access land. It should be noted that NAFTA does contain what are called “carve-outs” – exemption clauses intended to allow Canada to uphold the rights and preferences accorded to Indigenous peoples. However, these clauses are very limited in scope, and have not resulted from any formal consultation with Indigenous peoples.

But things seem to be changing, as the Canadian government has proposed the inclusion in NAFTA of an “Indigenous chapter” and has brought a draft to the negotiation table. This initiative represents one element of the government’s progressive trade agenda and one step towards its self-proclaimed commitment to building a nation-to-nation relationship with Indigenous peoples. And this time, consultation with Indigenous peoples has been a priority. Assembly of First Nations National Chief Perry Bellegarde was appointed to Canada’s NAFTA Council, which will advise the Minister of Foreign Affairs during the negotiations. Kenneth Deer, the external relations representative for the Haudenosaunee Confederacy, commended the extent of the government’s efforts to seek input from Indigenous communities on the NAFTA talks, saying it was “relatively new” for the government to engage with the Confederacy. Canada hosted several consultation sessions on international trade, which were attended by representatives from the Assembly of First Nations, the Métis National Council, and the Congress of Aboriginal Peoples, and also extended an open call for submissions from other stakeholders who wanted to take part in the negotiations.

One of these submissions was a proposal from the International Inter-Tribal Trade and Investment Organization (IITIO), a Canada-US NGO of legal experts and Indigenous representatives. This proposal became the basis of the Indigenous chapter of NAFTA, and may provide a glimpse into its contents. The submission proposes the creation of a committee of Indigenous representatives from all three NAFTA partners to assist in the development of programs to promote Indigenous peoples’ participation in national and international economies. The proposal insists that a revised NAFTA both retain current carve-outs and contain stronger exemptions that more effectively protect Aboriginal rights, treaty and title rights as well as cultural property and traditional knowledge. It stresses the importance of adhering to and directly referencing international human rights instruments like the UN Declaration on the Rights of Indigenous Peoples and the American Declaration on the Rights of Indigenous Peoples. The submission also recommends the inclusion of provisions in NAFTA allowing for freer movement of Indigenous peoples and their goods across the Canada-US border. In support of this contention, the proposal quotes the Treaty of Amity, Commerce and Navigation (also known as the Jay Treaty), an agreement signed in 1794 between the recently independent United States and Great Britain. The treaty stipulated that First Nations could choose to live on either side of the newly established border and could move and trade freely across it. Despite some accommodations by the US for freer movement, the Jay Treaty has not been sanctioned or implemented in Canada.

The IITIO submission contains worthy aspirations and important recommendations, but one might wonder what the real impact of an Indigenous chapter of NAFTA would be, particularly given the concern that the US might back out of the agreement entirely. Chapter drafters Michael Woods and Wayne Garnons-Williams of the IITIO believe that even if the chapter is not incorporated or the talks fail altogether, the process surrounding its creation and the discussion it provokes may lead to a modernization and revitalization of Indigenous trade and commerce. The chapter could also serve as a model for other Canadian and international trade agreements, as could a binational Canada-Mexico Indigenous peoples’ committee if the US were to remove itself from negotiations. Another question arises, however, as to whether the Indigenous chapter will truly improve outcomes for Indigenous peoples in Mexico. Mexican Indigenous farmers already suffer from competition with US imports under the current NAFTA regime. The Mexican government rarely consults Indigenous peoples before approving a project in traditional territories, and when it does, the consultation often occurs after the project is already underway. Perhaps unsurprisingly, the Mexican government has made no attempt to gather the input of Indigenous peoples on NAFTA negotiations. A third concern regarding the actual impact of the chapter surrounds the effect of directly referencing the UN Declaration on the Rights of Indigenous peoples given that both Canada and the US voted against the Declaration when it was adopted in 2007. Both have since endorsed the document, but the Declaration remains purely aspirational in the United States, and even Canada, which officially adopted it in 2016, has taken few concrete steps towards its implementation. Still, the inclusion of an Indigenous chapter seems a step in the right direction towards recognition and respect for Indigenous rights and the fostering of a fairer partnership. As the sixth round of negotiations has come to a close, the fate and impact of the Indigenous chapter of NAFTA is still to be seen.

 

For further information on this topic, hear Wayne Garnons-Williams, one of the lawyers behind the Indigenous chapter of NAFTA, speak at the McGill Journal of Sustainable Development Law colloquium this Friday, February 9th at 2:45 pm in the Thompson House Ballroom!

 

Also see the following articles from the journal’s past issues:

Reconciling Aboriginal Rights with International Trade Agreements: Hupacasath First Nation v. Canada

International Investment Agreements Between Developed and Developing Countries: Dancing with the Devil? Case Comment on the Vivendi, Sempra and Enron Awards

The Cost of Climate Change

Jennifer Rogers is a first-year student at the McGill Faculty of Law and an Associate Managing Editor with the McGill Journal of Sustainable Development Law. She holds a degree in French and Russian Language and Literature from the University of Alberta.

I grew up in the town of High River, Alberta. I lived there when the town flooded in 1995 and again in 2005. When my parents decided to move to another area of town, I remember them going to the town hall to examine the flood maps to ensure that, in the event of another flood, they didn’t take in water. None of the three houses they considered buying were in the flood plain, but by the end of the first day of flooding in June 2013, two of them were under water. The impact of that flood was devastating. People lost their homes and communities suffered damage that took years to repair. 100,000 were evacuated from their homes. Five died.

Alberta, despite having experienced significant, even comparable, flooding in the past, was not ready for a disaster of that magnitude. Outdated flood mapping meant that many areas were built on flood plains, despite this not being evident from available information. Infrastructure to protect these communities was inadequate. Because of this, significant flood mitigation measures had to be put in place following the flood. Rebuilding efforts entailed 80 to 100 years’ worth of infrastructure changes over a period of three years. High River is now the most flood-proof community in Canada according to its mayor. These efforts are vitally important, and despite their costs, will likely save money down the road in the increasingly probable event of another major flood. The question that follows, however, is why, despite a history of flooding and mounting evidence that natural disasters are going to increase in number, did the government fail to act before an event of this magnitude?

Canadians are facing the reality that these extreme weather events are only going to become more likely as time goes on. The US Fire Service reports that fire seasons now last 78 days longer on average than they did in 1970 and burn twice as many acres of land than they did 30 years ago. Canada’s federal government has warned that Canadians can expect to see more flooding and wildfires in the coming decades, even if both national and international communities take serious steps to combat climate change. In the past few years, Canada has seen costs associated with natural disasters increase dramatically. 2016 broke the record for insurable damage in Canada. In Alberta, the costs of the 2013 flooding in Southern Alberta and the 2016 Fort MacMurray wildfire alone soared to almost $16 billion.

If natural disasters can be expected to increase no matter what steps are taken to fight climate change, it is vital that the Canadian government turn its mind to natural disaster mitigation efforts. The costs of failing to do so are enormous, both financially and emotionally. Canadian victims of natural disasters are forced to either pay their personal rebuilding costs up-front and wait for disaster relief funds, or put their lives on hold until they have the resources to rebuild. This is a problem that disproportionately impacts lower income individuals and is made worse by the inefficacy of government repayment programs. One year after the 2013 floods, thousands of Albertans were still waiting for their disaster recovery claims to be processed.

Unfortunately, governments across Canada are falling behind when it comes to mitigation efforts. As mentioned above, much of the damage from the Southern Alberta flooding has been attributed to bad planning and outdated flood mapping.  A 2016 report assessing climate change preparedness published by the University of Waterloo’s Intact Centre on Climate Adaptation found that no Canadian province was sufficiently prepared for the impacts of climate change. In an assessment of flood preparedness, Ontario topped the rankings with a grade of B-, with the rest of the provinces scoring between C+ and D. Provinces have called for Canada to increase funding to the National Disaster Mitigation Program, which currently has a budget of $200 million. At the same time, the 2016 report from the Disaster Financial Assistance Arrangements program, which reimburses provinces and individuals for costs resulting from natural and man-made disasters, estimates that the program will pay out $902 million per year for weather related events over the next five years.

There are multiple arguments to support the need for better disaster preparation. The compassionate argument is one of these: better protections for Canadian communities reduces the number of people at risk of losing their homes, their possessions, or their lives. Another argument is the economic argument. The reality is that many of these disasters are far more expensive than the appropriate mitigation processes would have been (you can read more about some of the costs associated with flood mitigation in Alberta since 2013 here). Infrastructure damages are also not the only costs associated with disasters. Local economies are suppressed when local businesses are damaged, or when individuals cannot work or find themselves unable to participate in the market due to their recovery costs. Either way, there is little support for continued neglect for disaster mitigation efforts in Canada. Whether your motivations are compassionate or economic, the solution lies in being better prepared disasters that we can only expect will increase in severity and frequency.

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